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The Federal Communications Commission (“FCC”) is preparing to issue a critical ruling regarding the scope of the Telephone Consumer Protection Act (“TCPA” or the “Act”), 47 U.S.C. § 227. By way of this ruling, the FCC will likely attempt to impose strict liability for a breach of the TCPA’s automated telephone equipment restrictions on companies for whom telemarketers make telephone calls. In other words, the FCC will likely seek to hold companies strictly liable for the actions of their hired third-party telemarketers. That decision, if reached, will be wrong. Defense counsel need to be prepared to challenge it.

Automated Telephone Restrictions vs. Privacy Protections

The heart of the issue lies in the language creating private rights of action under two specific sections of the Act. Subsection (b) of the TCPA sets out a number of restrictions on the use of automated telephone equipment. This subsection prohibits a telemarketer from, among other things, utilizing an automatic telephone dialing system to place a call to a cellular telephone (other than a call made for emergency purposes or with the prior express consent of the called party). 47 U.S.C. § 227(b)(1)(A)(iii). Congress provided for a private right of action under this subsection, as follows: “A person or entity may . . . bring . . . an action based on a violation of this subsection. . . ” 47 U.S.C. § 227(b)(3).

Subsection (c) of the TCPA, on the other hand, protects subscriber privacy rights and provides for a private right of action against companies that make two or more telephone calls in a 12-month period to the same person in violation of the FCC’s regulations. 47 U.S.C. § 227(c)(5). Significantly, the language of the private right of action provision of this subsection contains a subtle but critical difference. It provides: “A person who has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of the regulations prescribed under this subsection may. . . bring . . . an action based on a violation of the regulations prescribed under this subsection. . . ” (emphasis added). Id.

Accordingly, subsection (c)(5) – the privacy section – permits a person to bring an action not only against the telemarketing company that places a prohibited call, but also the retailer on behalf of whom the call was placed. Subsection (b)(3) – the automated equipment section – does not contain “on behalf of” wording. The implication is clear: When faced with a lawsuit alleging privacy violations under (c)(5), a retailer should expect to be held strictly liable for any violations by its telemarketers, but when facing an automated equipment claim under section (b)(3), a retailer should only be held liable if the telemarketer is shown to be the retailer’s agent under a standard vicarious liability analysis. The FCC, however, has signaled that it does not agree with this approach.

Prior FCC Statements

The FCC has taken the position that “on behalf of” liability extends to not only subsection (c)(5) but also subsection (b)(3) and results in strict liability for both automated equipment violations and privacy violations against companies on whose behalf calls are made.

On August 7, 1995, the FCC issued a Memorandum Opinion and Order stating, in relevant part: “Our rules generally establish that the party on whose behalf a solicitation is made bears ultimate responsibility for any violation” (the “1995 Statement”). 10 F.C.C.R. 12391, 12397 (1995). Ten years later, on August 17, 2005, the FCC issued a Declaratory Ruling in which it stated: “We take this opportunity to reiterate that a company on whose behalf a telephone solicitation is made bears the responsibility for any violation of our telemarketing rules and calls placed by a third party on behalf of that company are treated as if the company itself placed the call.” (the “2005 Statement”) 20 F.C.C.R. 13664, 13667 (2005). Finally, on July 11, 2012, the FCC issued its latest revisions to the TCPA regulations. A new section of these regulations, subsection (a)(2), now provides that no person or entity may: “Initiate, or cause to be initiated, any telephone call that includes or introduces an advertisement or constitutes telemarketing, using an automatic telephone dialing system or an artificial or prerecorded voice. . . ” (emphasis added). 47 C.F.R. § 64.1200(a)(2). While the emphasized wording may be slightly disguised, the FCC’s intent certainly is not.

Upcoming FCC Ruling

The FCC’s prior statements, while raising doubt, have failed to quell the issue. As a result, in response to several petitions requesting clarification on this topic, on April 4, 2011, the FCC issued a public notice requesting comment on the “on behalf of” question. See 26 F.C.C.R. 5040. Since that time, the FCC has received comments, but has yet to issue a ruling. Nevertheless, given the FCC’s prior statements on this topic, it is likely that the agency will use this process to attempt to cement its now oft-repeated position and put the matter to rest. But the matter will not have been put to rest, as vigilant defense counsel will have several arguments at their disposal to thwart the FCC’s attempt to impermissibly expand the TCPA.

Arguments Against the FCC’s Position

The FCC’s anticipated ruling will be ripe for a challenge on several bases. First, the FCC’s prior statements on this issue were based on a flawed analysis. As support for its 1995 Statement, the agency cited 47 C.F.R. § 64.1200(e)(2)(iii) of its regulations (now 47 C.F.R. § 64.1200(d)(3)). But this section does not provide the FCC with the authority for its interpretation. The regulation referenced by the agency was implemented pursuant to subsection (c)(5) – the section under which Congress specifically provided for “on behalf of” liability – not subsection (b)(3). Accordingly, in reality, the FCC provided no support for its novel proposition that “on behalf of” liability extends beyond the privacy provision of the TCPA. Subsequently, in support of its 2005 Statement “reiterating” that “on behalf of” liability extends to any violation of the telemarketing rules, the FCC cited. . . its August 7, 1995, Memorandum Opinion. In reality then, the FCC was not merely “reiterating” a prior rule, but was attempting to make new law based on an unsupported and flawed interpretation. Accordingly, to this day the FCC has not cited proper support for its position.

Second, on January 4, 2008, the agency issued a ruling stating that “a creditor on whose behalf an autodialed or prerecorded message call is made to a wireless number bears the responsibility for any violation of the Commission’s rules. Calls placed by a third party collector on behalf of that creditor are treated as if the creditor placed the call.” 23 F.C.C.R. 559, 565 (2004). The inherent discrepancy revealed by this statement is readily apparent: if the TCPA already provides for “on behalf of” liability under subsection (b)(3), there would be no need for the FCC to find that creditors are liable for calls made on their behalf – that would already be the case. Accordingly, the FCC’s own statement in this instance implicitly acknowledges that there is no general “on behalf of” liability under subsection (b)(3).

Third, courts have recognized the distinction between subsections (b)(3) and (c)(5) and have generally applied traditional concepts of vicarious liability in subsection (b)(3) claims.1 Moreover, at least one court has specifically rejected the FCC’s views. In a very recent decision, Mey v. Pinnacle Security, LLC, 2012 WL 4009718 (N.D.W.Va. Sept. 12, 2012), the plaintiff cited the FCC’s 2005 Statement to support her argument that the defendant should be held strictly liable, under subsection (b)(3), for telephone calls placed on its behalf. The court rejected this argument – commenting that the FCC’s statement was not entitled to Chevron deference and correctly holding that the TCPA does not allow for strict “on behalf of” liability under subsection (b)(3). Mey, 2012 WL 4009718 at *3-4.

Finally, and most importantly, the FCC’s upcoming interpretation will be subject to a rigorous Chevron examination. In Chevron U.S.A. Inc., v. Natural Res. Def. Council, Inc. 467 U.S. 837 (1984), the U.S. Supreme Court discussed under what circumstances courts should defer to an agency’s construction of a statute. The first question under the Chevron test is whether Congress has directly spoken to the question at issue. If the intent of Congress is clear, both courts and agencies must give effect to the unambiguously expressed intent of Congress. See Id. at 842-843. In this particular instance, it is clear that Congress included “on behalf of” wording in the private right of action provision of subsection (c), while it did not include such wording in the private right of action provision of subsection (b). Under well-accepted rules of statutory construction, where Congress includes particular language in one section of a statute but omits it in another section of the same act, it is generally presumed that Congress acts intentionally and purposely. Mey, 2012 WL 4009718 at *4. Accordingly, even if the FCC releases an official position finding that the TCPA provides for “on behalf of” liability under both sections (b)(3) and (c)(5), vigilant defense counsel should consider challenging the FCC’s interpretation on this basis.

Conclusion

When the FCC issues its upcoming ruling on the “on behalf of” question, it will likely attempt to expand the reach of the TCPA beyond clear Congressional intent to improperly encompass a wider sphere of defendants. Defense counsel need to be prepared to protect their clients from such an impermissible expansion.

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